In the UK, Capital Gains Tax (CGT) is generally not the same as Income Tax. Why not?

Interest over £1,000 basic rate tax payer, £500 40% tax and £0 for highest rate have to be declared on your tax returns growstuff and is added on to your annual income, and taxed.

But that first £1,000 isn't taxed. There's no good reason why this should be so. It's all income.

Bonds of any sort also take money out of the economy to prevent inflation. When the bond is redeemed and the money is spent it is taxed in the normal way. Its taxation just isn't immediate.

Money which is earning interest, investments or share income is often money which has already been taxed when earned.

That's specious argument. Money which pays VAT on purchases ,licence fees & renewal fees (driving licence, passport renewal for e.g) is also money which has been taxed when earned. There's little special treatment which exempts anyone from paying it.

The government creates and issues all our money, it taxes back a proportion of it to prevent inflation. There is no reason why it should make any sort of 'special case' for some of that money to be more lightly taxed on the grounds that it's already been taxed.

The 'deficit' between the money it has issued and the amount it taxes back is the amount of money in the economy which it hasn't yet taxed back. The deficit is essential for keeping money in circulation to drive economic activity and to accommodate a growing population. It also represents people's savings.

N.B. Money is created by banks, under licence from the government; as loans which are paid back, plus interest. Once the loan is repaid the money the bank created is essentially 'dead', it no longer exists, the interest is the bank's profit. Only money spent directly into the economy by the government leaves enough money in the economy, after taxation, to enable continuing economic activity.

growstuff

GrannyGravy13

Money which is earning interest, investments or share income is often money which has already been taxed when earned.

This is not the case for inherited wealth, but even that would have been taxed at 40% if it was over £million.

CGT covers many areas.

But the interest hasn't been taxed.

Interest over £1,000 basic rate tax payer, £500 40% tax and £0 for highest rate have to be declared on your tax returns growstuff and is added on to your annual income, and taxed.

The only way to avoid tax on interest or gains is an ISA or take your luck with Premium Bonds.

We owned a second home , bought for a S , very briefly in 2002/3.
When we sold it CGT was 40%.
It came down after that date to I think, 24% so it was more than income tax in those days.

GrannyGravy13

Money which is earning interest, investments or share income is often money which has already been taxed when earned.

This is not the case for inherited wealth, but even that would have been taxed at 40% if it was over £million.

CGT covers many areas.

But the interest hasn't been taxed.

Thanks for replying GrannyGravy13, I keep trying to clarify this in my own mind.

I think the counter arguement to what you suggest is that the initial capital itself - often accumulated from already taxed income or assets - should not be, and as far as I can see, is not taxed.

Taxing the passive income from the investment is a way to tax an ongoing economic benefit. This still encourages investment and economic activity whilst only taxing the returns or income generated from that wealth, rather than taxing the wealth multiple times.

If we are not to increase wealth inequality then this tax should surely be the same as that on earnings from work?

Rachel Reeves prefers to follow a Conservative economic policy.

Money which is earning interest, investments or share income is often money which has already been taxed when earned.

This is not the case for inherited wealth, but even that would have been taxed at 40% if it was over £million.

CGT covers many areas.